In response to ongoing changes in the banking industry, Moody’s continues to enhance its bank rating methodology in order to maintain the relevance and accuracy of Moody’s credit analysis and ratings.

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Counterparty Risk Rating Methodology Baseline Credit Assessment Support & Structural Analysis

Corporate Governance in Bank Ratings Infographic

As part of Moody’s bank rating methodology, governance is assessed under a Corporate Behavior framework. Moody’s currently applies Corporate Behavior adjustments to 75 banks globally, most of which are negative.

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Proposed changes to the banks methodology

Moody’s Investors Service is seeking feedback by May 10, 2021 from market participants on proposed changes to the Advanced Loss Given Failure component of its Banks Methodology. This proposal includes revisions that were proposed in a March 2020 Request for Comment as well as some additional revisions related to Advanced LGF.

The proposed changes reflect evolving regulatory approaches to resolution, changes in banks’ liabilities structures and Moody’s own reassessment of the risk of loss faced by holders of more junior instruments as well as to simplify and harmonize the analytical treatment of AT1 securities and the rating of highly integrated entities.

For more details on the proposed changes and to provide feedback:

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Bank Methodology Overview

Moody’s approach starts by analyzing a banks intrinsic or standalone strength, without external support, and assigning a Baseline Credit Assessment.

In the Support & Structural Analysis component, consideration is given to the potential for external or Affiliate Support, the expected loss in the event of a default or bank failure, the Loss Given Failure, and the likelihood of Government Support.

Click on the components below to learn more.

baseline credit analysis